The shares of Cypress Semiconductor Corporation have increased by more than 7.22% this year alone. The shares recently went up by 0.93% or $0.15 and now trades at $16.34. The shares of Seadrill Limited (NYSE:SDRL), has jumped by 38.35% year to date as of 05/14/2018. The shares currently trade at $0.32 and have been able to report a change of 15.48% over the past one week.
The stock of Cypress Semiconductor Corporation and Seadrill Limited were two of the most active stocks on Monday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.Next 5Y EPS Growth: 22.30% versus 31.10%
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that CY will grow it’s earning at a 22.30% annual rate in the next 5 years. This is in contrast to SDRL which will have a positive growth at a 31.10% annual rate. This means that the higher growth rate of SDRL implies a greater potential for capital appreciation over the years.Profitability and Returns
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. CY has an EBITDA margin of 17.09%, this implies that the underlying business of CY is more profitable. The ROI of CY is 1.10% while that of SDRL is -37.50%. These figures suggest that CY ventures generate a higher ROI than that of SDRL.Cash Flow
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CY’s free cash flow per share is a negative -1.08, while that of SDRL is positive 2.42.Liquidity and Financial Risk
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for CY is 1.30 and that of SDRL is 2.60. This implies that it is easier for CY to cover its immediate obligations over the next 12 months than SDRL. The debt ratio of CY is 0.52 compared to 0.20 for SDRL. CY can be able to settle its long-term debts and thus is a lower financial risk than SDRL.Valuation
CY currently trades at a forward P/E of 11.43, a P/B of 3.18, and a P/S of 2.44 while SDRL trades at a P/B of 0.02, and a P/S of 0.07. This means that looking at the earnings, book values and sales basis, CY is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of CY is currently at a -18.91% to its one-year price target of 20.15. Looking at its rival pricing, SDRL is at a -68% relative to its price target of 1.00.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), CY is given a 2.40 while 4.00 placed for SDRL. This means that analysts are more bullish on the outlook for SDRL stocks.Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for CY is 3.39 while that of SDRL is just 5.98. This means that analysts are more bullish on the forecast for CY stock.
The stock of Cypress Semiconductor Corporation defeats that of Seadrill Limited when the two are compared, with CY taking 5 out of the total factors that were been considered. CY happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, CY is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CY is better on when it is viewed on short interest.